EFFECTS OF FINANCIAL TECHNOLOGY ON THE FINANCIAL PERFORMANCE OF BANKS: EVIDENCE FROM SELECTED COMMERCIAL BANKS IN ETHIOPIA

Abstract

Abstract Financial technology is provided as a new form of monetary service traded that merges
information technology with fiscal service similar to payments, remittance, and also the
management of assets. The purpose of this study is to investigate the effect of financial
technology (automated teller machine, mobile banking, Internet Banking, point of sale terminals,
debit cards and networked bank branch) on the financial performance of commercial banks in
Ethiopia. To achieve this objective explanatory research design with a quantitative approach
was used. The study fully employed secondary data from the period 2013-2022. Collected data
from purposively selected 13 privately owned commercial banks audited financial statement and
by using STATA software packages analyzed through descriptive statistics and regression
analysis methods. The study employed a random-effect model as confirmed by the Hausman test.
. The study found that point of sale terminals (β =5.14e7 prob. = 0.013), and number of internet
Banking NIB (β =2.22e13 prob. = 0.051). Whereas, mobile banking (β = -1.56e13 prob. =
0.052) and networked bank branch (β = -5.29e06 prob. = 0.004) has a negative and statistically
significant effect on Commercial banks’ financial performance. On the other hand, automated
teller machine (β= -3.74e07 prob. = 0.456) and debit card (β = -4.38e13 prob. = 0.241) was
found to be negative and statistically insignificant. Based on the findings of the study, it is safe to
conclude that financial technology has a significant effect on the financial performance of
commercial banks in Ethiopia.